How To Build A Profitable Vintage Wine Portfolio

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Financially there has never been a better time to build your wine portfolio and indeed, investors recognize London as a hub for fine wine investment.

Still knowing who to trust with your portfolio and even which vintages to place your money in can be a baffling business. We interviewed Tim Shaw from Vanquish Wines who specialize in the finest, rarest, and most sought after bottles of wine in existence to find out how to start building a luxury wine portfolio.

What makes wine such an attractive alternative investment?

Fine wine is an attractive investment for many reasons. Currently fine wine is witnessing unprecedented demand from emerging markets, especially Asia and in particular China.

The top Chateaux of Bordeaux, where the majority of investment grade wines come from, cannot expand production; in fact as they strive for perfection in their wines, they are limiting production through severe selection.  With new demand from emerging markets, coupled with the traditional markets of America and Europe returning to the market, this puts pressure on supply and therefore pushes up prices.

Fine wine investment is a tax-free investment. Wine is viewed as a “wasting asset” and therefore is currently capital gains tax-free. You also pay no duty or VAT as you hold the wine in a bonded warehouse.

Wine is a physical investment, in the worst case you can always drown you sorrows!

How has economy over the last few years affected wine values?

Fine wine was the last commodity to drop in the financial crisis of 2008, dropping around 25 percent in the three months post Lehmann Brothers collapse.

It was also the first to recover, with the Livex 100, the most used measurement of the fine wine market recovering to 2008 highs by April 2010 and it now stands 30 percent above that level.

In general the value of the fine wine market does not track equity or other commodity markets, therefore making it an excellent hedge against traditional investments.

What factors influence how fine wine increases in value?

As wines mature and get drunk the amount in the market dwindles and this puts pressure on prices, pushing them up.  This is quite simply supply and demand.

Other factors are the quality of the vintage, which can affect the cost of the wine, for example Lafite 1982 (viewed as a great vintage) is £50,000 a case, but a case of 1984 (a very poor vintage) would cost around £7,500.

Another factor is the influential American wine critic Robert Parker who scores wines out of 100. If Mr. Parker scores a wine between 95-100 this is an investable wine, and if it ever hits the magical 100 points, the value could skyrocket.

What are you recommending potential investors to buy at the moment?

I always recommend first growth properties from great vintages to first time investors, as these are the safest wines to be invested in—just like blue chip stocks.

For those looking to take a slight risk I would recommend buying into large formats of all top Bordeaux and off-vintage Petrus. There may also be opportunities in the upcoming En Primeur campaign (when the Bordelais release the new vintage).

2010 is another very strong vintage, but buyers must beware of over inflated prices and talk to their merchant at length before purchasing any of these wines.

How do you go about building a balanced wine portfolio?

To build a balanced wine portfolio for wine investment you need to have a mixture of the best Chateau from the best vintages. You may also want to mix in some larger formats, which are viewed as trophies by some wine collectors. The key is not being over reliant on one wine from one vintage. This way if one wine doesn’t perform particularly well, you are covered as you have other wines, which may have appreciated in price nicely.

What are the options for storage?

Wines for investment should always be stored under bond.  At Vanquish, we store at EHD, which is a Second World War air raid shelter. The conditions for wine are perfect and the chap that runs it has incredible knowledge of how to look after fine wine. There are three or four excellent options like this in the UK.  Rates are cheap (around £15 per case per annum). Always make sure you wines are insured to full market value.

Are investors in London as keen to invest in wine as elsewhere in the word?

London is the hub for fine wine investment; all of the big wine investment companies are based here and were set up here. Clearly the results have sparked interest in the rest of the world, however foreign investors tend to come to London when investing as we have a proven track record and the relevant expertise.

How is Vanquish Wine able to help create portfolios for potential wine investors?

Vanquish runs its own Managed Personal Wine Portfolios for private investors looking to get into fine wine investment. With an entry level of £50,000 Vanquish will put together a bespoke wine portfolio for strictly investment or drinking and investment. We will manage your wines, send you regular updates on their performance and offer to buy the wines back from you at current market value when it is time to sell.

For more information about how you can invest with Vanquish by setting up a MPWP please contact [email protected]

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